LSB outlines ‘outcomes-based approach to ABS

THE LEGAL Services Board (LSB) has published new proposals for the licensing of the first alternative business structures (ABSs) as soon as mid-2011 under the Legal Services Act 2007.

The oversight regulator says it expects approved licensing authorities (LAs), such as the Solicitors Regulatory Authority, to take an “outcomes-based approach” to their duties. Core outcomes listed include appropriate levels of redress against negligence and fraud, upholding justice and the rule of law, and improved information about employee diversity.

“We do not consider that adopting this approach in any way equates to ‘light touch’ regulation,” the LSB consultation paper states.

“In fact, this approach will give LAs increased flexibility in their enforcement enabling the focus to be on ‘the spirit of the law’”.

The document also signals “a break from the past”, it continues, with “much stronger” regulatory scrutiny of legal businesses as a single “economic unit”.

“The regulation of the conduct of individual lawyers will remain an important element of consumer protection and the safeguarding of professional practice, but, alongside this, there will be a new focus on regulating the environment in which individuals operate and the compliance systems that govern behaviour.”

Specific proposals for ensuring consumer protection also include the introduction of two new management roles at every law firm, a head of legal practice (HoLP) and a head of finance and administration (HoFA), as well as a fitness test for any non-lawyers owners or managers of ABSs and a widening of the complaints-handling regime to incorporate firms that deliver both legal and non-legal services.

LSB chairman David Edmonds CBE, explained that many of the practices permitted under ABS “already take place, often by ‘working around the rules’”.

“The Legal Services Act itself sets out a number of protections for lawyers and consumers; this document gives these protections flesh and, more importantly, teeth.”

“We have set an ambitious timeframe for ABS. But mid-2011 gives us time to deliver effective change,” he added.

The consultation paper Alternative business structures: approaches to licensing closes for input on 19 February 2010.